Unemployment to Self-Employment: The Long and Winding Road?

Judy McGregor, David Tweed

This paper looks at the relationship between dependency and self-employment in an effort to stimulate much-needed debate about the social considerations of the growth in small and medium-size enterprises (SMEs).

We start by looking at the economic and social significance of SMEs, which account for 99.4% of all enterprises and 60% of the New Zealand workforce. Despite their obvious significance for unemployment policy, there is a policy vacuum in New Zealand around small business and little detailed knowledge of this sector.

We then present some of the results of a nationwide survey of small business in New Zealand. From these we tentatively conclude that there is no clear, sequential path from dependency to self-employment, indicating that a variety of “push” and “pull” factors are operating. Whether those on a benefit should be helped into self-employment clearly needs further research.

The study has implications for the government non-interventionist policy of creating the right economic environment, which for small business makes for a fragmentation of policy initiatives and ad-hoc structural support. The most significant issue to arise from the study is the need for social factors to be explored along with economic issues in formulating a policy for SME development.